Prenup agreements are now part and parcel of the Australian Legal Industry whereas they used to be something you would only read about in the Hollywood tabloids. However, amongst the legal fraternity there has been growing fears as to how watertight these agreements are. Many lawyers are now worried that they themselves will be sued by disgruntled clients whose agreements haven’t stacked up in the eyes of the Court.
The Sun-Herald has reported that thousands of pre-nuptial agreements may be ruled invalid if one man’s mission to extricate himself from a multi-million dollar payment to the pole dancer he married is successful.
Lawyers are closely watching what is known in family law circles as “the pole dancing case” for its potential to disrupt every agreement signed since 2004 amid claims the legislation surrounding pre-nuptial agreements is in “disaster territory”.
The man, who was given the court pseudonym of Mr Wallace, is challenging his pre-nuptial agreement on several grounds, including that the law governing such agreements is faulty.
Mr Wallace became besotted with pole dancer Ms Stelzer after meeting her at a Sydney club around the time he separated from his first wife. They married seven years later in 2005.
The parties entered into a pre-nuptial agreement that provided that Mr Wallace would pay Ms Stelzer $3.25m if their relationship broke down within four years. They separated less than two years after they married.
Mr Wallace, who has net assets of over $16m, is now claiming the agreement is invalid. He claims that Ms Stelzer, who has just over $10,000 in assets, behaved fraudulently when she professed before the marriage that she loved him, wanted to have children with him, and spend the rest of her life with him.
Mr Wallace also provides that his original solicitor did not give him proper advice on the advantages and disadvantages of entering the agreement. His current solicitor, Trevor Hall, asserted that the weakness of the legislation meant no financial agreement signed between couples was safe. “Every binding financial agreement ever entered into is at some risk of being set aside if years later a spouse wants to suggest that the advice they received was not proper legal advice”, Mr Hall said.
In 2004, amendments were made to the Family Law Act that required solicitors to certify they had taken certain steps to ensure their clients understood their agreements. This resulted in a wave of litigation with people attempting to avoid their obligations on the basis that their lawyers had not followed those steps meticulously. In 2010, amendments were made to the Act relaxing the wording.
Mr Wallace claims the changes should not apply in his matter retrospectively as that is unconstitutional.
The appeal has alarmed the Attorney-General for its potential to affect thousands of agreements. It has appointed Senior Counsel to intervene in the matter, joining Ms Stelzer’s barrister in maintaining the agreement is valid.
Family lawyer Duncan Holmes said more people were challenging their agreements on the basis of inadequate legal advice and lawyers were concerned about their liability. “The legislation is in disaster territory”, Mr Holmes said. “Well intentioned legislation is getting corrupted and lawyers are running scared”.
In 2011 His Honour Justice Benjamin upheld the validity of the pre-nuptial agreement saying that Mr Wallace’s case was coloured by criticism of Ms Stelzer, whose evidence he preferred. “At many levels this criticism seemed to endeavour to demean her and their relationship, bearing in mind the wife’s initial occupation and the circumstances of their meeting”, His Honour said.
Mr Wallace has appealed to the Full Court of the Family Court of Australia.